Here's an interesting essay on the question:
***** FOREIGN CREDITORS AND THE POLITICS OF DEVELOPMENT IN AUSTRALIA AND ARGENTINA 1880-1913
Herman Schwartz Government and Foreign Affairs PO Box 400787 University of Virginia Charlottesville VA 22904-4787 434 924 3192 (x3359 fax) e-mail: hms2f at virginia.edu http://www.people.virginia.edu/~hms2f
Author Bio note
Herman Schwartz is Associate Professor of Government and Foreign Affairs at the University of Virginia. He is author of In the Dominions of Debt, States vs. Markets (1st & 2nd ed.), and currently is working on a book comparing public sector reorganization in Australia, Canada, Denmark, New Zealand, and Sweden in the 1980s and 1990s. See http://www.people.virginia.edu/~hms2f for other published work on similar topics....
...INTRODUCTION
What political, economic and social factors cause political stability and economic growth? Many scholars have compared Argentina and Australia in search of answers to this question. Most of these scholars believe the key differences accounting for Australia's growth and stability and Argentina's instability and stagnation emerged at the end of the nineteenth century (inter alia see Smithies, 1965; Moran, 1970; Ehrensaft and Armstrong, 1978; Dyster, 1979; Fogarty and Gallo, 1979; Denoon, 1983; Duncan and Fogarty, 1985; Platt and di Tella, 1985; Senghaas, 1985). Despite a diversity of theoretical approaches, these studies all accept the notion that large landholders impede development. Therefore they see Australian Labor's greater strength relative to landowners at the end of the nineteenth century and beginning of the twentieth as the key factor differentiating Australia from Argentina.(1) Duncan and Fogarty (1985), the best of these, seem a partial exception but ultimately fit this pattern too. Labor's strength generally is explained in terms of qualities inhering to or concerning Labor and its substratum of unions: superior organization, legal protections, etc. These studies thus fail to consider the degree to which Australian Labor's strength was a product of Australian landowners' prior defeat at the hands of their creditors.
Put crudely, Australia's greater degree of colonial subjection meant that foreign lenders--largely British--were stronger there than in Argentina, and that in contests between lenders and landowners in both countries, lenders prevailed in Australia but not Argentina. Creditors' role in defeating Australian landholders in turn calls into question these analysts' assumption that landholders' economic interests as a class necessarily impede development. Instead, we must substitute a more textured appreciation of landholders that considers their interests as producers, interests which do not necessarily impede development.
This essay significantly revises the three common features most of these analyses possess, in a two stage argument. The first stage compares the relationship between creditors and landowners in Argentina and Australia to explain the differing fates of the landowning class. The second stage then shows how these differing fates affected the subsequent process of economic development. This process in turn forces a reassessment of the theoretical assumptions that have guided the analyses criticized here. These theories, of course, have practical contemporary significance. The role foreign lenders and debt play in development--surely an increasing concern today--is poorly understood. Argentina and Australia's differing experiences shed interesting light on the current debt crisis, including appropriate roles for the International Monetary Fund, state economic intervention, and the question of debt relief.
SOURCES OF DIVERGENCE BETWEEN AUSTRALIA AND ARGENTINA
Two omissions and one common assumption deriving from theoretical predispositions reinforce the tendency of most comparative studies to explain Australian development on the basis of workers' strength. First, following analysts of "informal empire" (Gallagher and Robinson, 1953; Ferns, 1953), these studies typically assimilate Argentina's situation of formal independence but great economic dependence on Britain with Australia's situation of local self governance and economic dependence, omitting the political advantages accruing to Argentina by virtue of its independence. Second, these studies largely overlook the influence both countries' enormous foreign debts had on their respective development and politics, or, when they acknowledge lending, place lenders firmly in the landowners' camp. Finally, these studies all have a common theoretically based assumption that rural elites (and the rarely mentioned foreign lenders) have interests unavoidably producing underdevelopment. Obscuring the role of foreign lenders, and homogenizing both lenders and landholders, these studies fail altogether to consider the possibility that differences between Australia and Argentina emerged at least in part because of the different economic and political roles foreign lenders played in the two countries.
While these analysts disagree on precisely when Argentina and Australia began diverging, they all see divergence as a function of political and economic attacks on large landowners by other classes. This view associates intensification of production--development--with smallholding and with strong labor movements, and with the rise of urban manufacturing. Development thus can only occur when smallholders and workers successfully challenge the power of rural elites and their financial allies, for rural elites are presumed to be antagonistic to urban manufacturing and reluctant to invest in capitalist agriculture. Though we will elaborate on this below, it is sufficient here to note that while this may be true for rentier landlords, it is not clear why it should be true for owner-operators, including those producing on a large scale. As producers, landowners' interests may, but do not necessarily impede urban development, and by no means are inconsistent with agricultural development. Let us examine three typical arguments.
Dyster (1979) claims the two countries diverged in the early nineteenth century when a mercantile class oriented to domestic consumption emerged in Australia but not Argentina. This trading class prevented Australian landowners from repressing workers, and forced landowners to replace convict labor with free immigrant workers. Because these merchants profited from workers' consumption, they strove to keep wages up and link rural prosperity with domestic markets, thus preventing disarticulation in the domestic economy.
Both Moran (1970), and to a more limited extent Senghaas (1985), attribute divergence to the differing policies of the Australian Labor Party and the Argentine Uni¢n C¡vica Radical in the early twentieth century. For Moran (1970:79-85), the Labor Party and its sometime Liberal allies pursued domestically oriented industrialization behind a range of protectionist devices, while the Radicals eschewed tariffs and thus industrialization. Protected industry created the bases for political compromise and coalition in Australia; its absence led to confrontation and zero-sum politics in Argentina.
Senghaas (1985:46-53) echoes Moran, though his general theoretical argument also points to the shift to intensive production by smallholding family farmers in Australia as an additional decisive difference from Argentina. This shift also enlarged the rural market available to Australian domestic manufacturers. Australian development thus occurred because classes or groups--Dyster's merchants, Moran's Labor Party, Senghaas' family farmers--arose to oppose large holders. In Argentina, landowners' interests prevailed because the Radicals' "economic policies were influenced, if not guided, by men associated with the interests of the landed exporters" (Moran 1970:87).
By focussing on the efforts of groups either potentially or actively opposed to landowners, and ignoring foreign lenders, these analyses look simply to the absolute political strength of opposition groups, and not their political power relative to that of landowners. After all, though much is made of Australian Labor, graziers did decisively crush unions in the 1890s, and the Labor Party governed only a total of six years before World War I conscription issues tore it apart. Focussing on Australian Labor's absolute strength not only exaggerates that strength but also hides an important question: why were Australian graziers politically weaker than their Argentinean counterparts, the estancieros? The answer: foreign creditors contributed decisively to Australian Labor's ultimate victory by weakening the graziers who otherwise might have defeated Labor as successfully and easily as Argentinean estancieros defeated their own workers....
[The full article with endnotes & sources are available at <http://www.people.virginia.edu/~hms2f/foreign.html>.] *****
Any comments on the Herman Schwartz article? Qualifications? Criticisms?
Yoshie